Why do gold and silver coins have denominations?

[disneysteve]

I got the US mint catalog the other day. Among other things, it advertises the 1 oz platinum, gold, and silver coins. The platinum coins have a $100 denomination, $50 for gold, and $1 for silver. Why do they do that? An ounce of platinum is about $850/oz, gold is $1,200, and silver is $16. Clearly, nobody is ever going to use those coins for their designated denominations. Is there some legal reason why they have to give the coins a denomination rather than just selling them as 1 oz coins?

[corn18]

Apparently, the face value is set by Congress:

https://money.stackexchange.com/questions/24874/how-does-a-mint-determine-the-face-value-of-precious-metal-coins-and-what-does-i

Q: How do the mint set the value? Surely it cannot be a value plucked from the sky.

Actually, that's exactly how it is set - plucked from the sky. Not by the mint, though, by Congress (in the case of the US, similarly in other countries). The US mint merely executes orders given by the US Congress and signed into law by the US President. For example, the wildly popular Silver Eagle bullion coin is authorized by the Statue of Liberty - Ellis Island Commemorative Coin Act. The act specifies the denomination ($1 in this case), the metal composition (99.9% pure silver, in this case) and the visual appearance. See description here.

ALL the US coins that are minted - are minted exactly as described and prescribed in the relevant legislation, and that includes the denomination.

Precious metal coins are not intended for circulation, but rather for collectors. Thus, the denomination doesn't correspond to the coins' real (intrinsic) value - the actual value of the metal is significantly higher than the denomination of the coin (with the notable exception of the Canadian $20 for $20 series).

Q: Furthermore, what does the value imply to the bearer? Is it redeemable for $25 at any time?

Yes, they're legal tender. Obviously it would be ridiculous to do that since the metal content worth much more than the denominated value. It has also been set as a legal precedent that payment with these coins cannot be taken at face value, but rather at their real (metal content) value, for the purposes of income tax assessment.

[disneysteve]

Yes, they're legal tender. Obviously it would be ridiculous to do that since the metal content worth much more than the denominated value.

It seems pretty silly to stamp $100 on a coin that is worth 12 times that much in reality. But trying to make sense of government policy is always a waste of time.

[TexasHusker]

It seems pretty silly to stamp $100 on a coin that is worth 12 times that much in reality. But trying to make sense of government policy is always a waste of time.

Yeah pretty much.

[myrdale]

I'd been of the opinion that the mint was in the business of producing "coins", not bullion. Therefore, for the mint / government to have some hand in the market and put out their general propaganda (United States of America / In God We Trust / etc) they make coins.

Where it gets really crazy is when you consider a penny cost $0.015 to produce.

Coins prior to 1964 (which are still in circulation) are made of some amount of silver.

I am a little confused about where these coins originate as you can't simply go to the bank and purchase $20 in silver $1 coins.

[disneysteve]

I am a little confused about where these coins originate as you can't simply go to the bank and purchase $20 in silver $1 coins.

They are produced by the US Mint but they are not released into circulation for obvious reasons. You can only buy them directly through the mint (or on the secondary market).

[~bs]

denomination determined by congress.

having face value determines legal tender status, which is the purview/right of the government. Without legal tender status, the coins are merely pretty discs with pictures stamped on them which may (or many not) contain the metal content stated. Technically all other silver/gold coins privately minted cannot display a US dollar value, as that would be counterfeit.
The government obviously wouldn't want to set a legal tender value too high because if the value of the metal plummetted, people could redeem for more than the coin is worth and possibly issued for. Say they set value of gold coin to $1000, and during the year the value of gold crashed to $500. People would be buying the coins for close to $500, then being able to sell them for the legal tender value. That is why they explicitly set it at a nominal value (that isn't too insulting like $0.01, $0.02, etc)


Norfed is a private issuer that directly defied the federal government on these rules and they got slapped down

https://www.thesprucecrafts.com/norfed-liberty-dollar-coins-768362

[~bs]

I'd been of the opinion that the mint was in the business of producing "coins", not bullion. Therefore, for the mint / government to have some hand in the market and put out their general propaganda (United States of America / In God We Trust / etc) they make coins.

The US mint is a money making machine for the government. they make tons of money pumpining out special commemoratives, bullion, and proof version of circulation coins.

[disneysteve]

The US mint is a money making machine for the government. they make tons of money pumpining out special commemoratives, bullion, and proof version of circulation coins.

And that is by no means a recent phenomenon either. I remember my father buying a "proof set" each year when I was little, and he had them from before I was born. I actually still have them all. I think the marketing machine is much more active today but even back in the 50s the mint sold stuff to collectors. We used to visit the US Mint in Philly pretty regularly and they sold all kinds of stuff in their gift shop.

[~bs]

^

It is far more active today, and is resulting in burnout by collectors, as they're releasing so many products types and variations that collectors cannot keep up, so end up losing interest. Back in the old days, say the 50s, off the top of my head, there were only a couple variations of the collector sets, proof and uncirculated.

It's as if disney decided to release a specific themed mickey memorabilia every year. Collectors could anticipate adding 1 per year to their collection. Then they decided to make more money, so start releasing 50 mickey memorabilia variations per year, none of which is cheap. It's harder to keep up with, not to mention where are you going to store and display 50 different ones per year? Then it becomes not as fun and a very expensive hobby.

[disneysteve]

^

It is far more active today, and is resulting in burnout by collectors, as they're releasing so many products types and variations that collectors cannot keep up, so end up losing interest. Back in the old days, say the 50s, off the top of my head, there were only a couple variations of the collector sets, proof and uncirculated.

It's as if disney decided to release a specific themed mickey memorabilia every year. Collectors could anticipate adding 1 per year to their collection. Then they decided to make more money, so start releasing 50 mickey memorabilia variations per year, none of which is cheap. It's harder to keep up with, not to mention where are you going to store and display 50 different ones per year? Then it becomes not as fun and a very expensive hobby.

Disney has done exactly that numerous times.

Example: Years ago, they released a very limited edition set of watches. If you bought all 6 watches and sent in the certificates, you got a 7th watch. The set sold out very quickly. So of course they came out with a second series but upped the edition size a lot. That one sold out eventually but it took a while. So they came out with a third series with an even larger edition size and couldn't give the things away. The collectors had already gotten 14 watches in a fairly short time and just didn't want any more. Plus, the bigger the edition size, the less desirable they are.